Did I get this right? Taxpayer (2010) contributed $2,000 to a health savings account (HSA). Her employer contributed $400. During the year, $2,700 was distributed (there was a balance in the account as of
I see how the distribution is not taxable, but I'm coming up with the client not reporting any income from the distribution on lines 7-21 of Form 1040 AND getting a $2,000 adjustment on line 25 of the 1040. Did I miss something?
Thanks, Gary
That looks right to me. $2000 deduction for money contributed to the HSA, and no income distribution for the money distributed for qualified medical expenses.
No, as long the Qual. Med. expenses were at least $2700. Having the HSA lets you take the $2000 deduction "above the line" (no itemizing required) rather than putting the $2700 you would have had to pay on Schedule A, where you may not have received any tax benefit.
The difference between the $2000 deduction and the $2700 of expense is the $300 from your HSA account that you would have deducted in a previous year and the $400 from your employer that is a freebie.
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